Aetna Life Ins. Co. v. Middleport 124 U.S. 534 (1888)

U.S. Supreme Court

Aetna Life Ins. Co. v. Middleport, 124 U.S. 534 (1888)

Aetna Life Insurance Company v. Middleport

Submitted January 4, 1888

Decided February 6, 1888

124 U.S. 534

Syllabus

The Town of Middleport having, in pursuance of a statute of Illinois, voted an appropriation to the Chicago, Danville and Vincennes Railroad Company, to be raised by a tax on the property of the inhabitants of the town, issued bonds, payable with interest to bearer, for a sum large enough to include interest and the discount for which they could be sold, and delivered them to the railroad company, and they were accepted by that company, and sold and delivered to plaintiff.

Held:

(1) That the purchase of these bonds by plaintiff was no payment of the appropriation voted by the town to the railroad company.

(2) That, the bonds having been held to be void in a suit between the plaintiff and the town, this did not operate as a subrogation of the plaintiff to the right of the company, if any such existed, to enforce the collection of the appropriation voted by the town.

(3) The doctrine of subrogation in equity requires, 1, that the person seeking its benefit must have paid a debt due to a third party before he can be substituted to that party's rights; and, 2, that in doing this, he must not act as a mere volunteer, but on compulsion, to save himself from loss by reason of a superior lien or claim on the part of the person to whom he pays the debt, as in cases of sureties, prior mortgagees, etc. The right is never accorded in equity to one who is a mere volunteer in paying a debt of one person to another.

This is an appeal from a decree of the Circuit Court of the United States for the Northern District of Illinois dismissing on demurrer the bill of the Aetna Life Insurance Company, the present appellant. The substance of the bill is that the complainant is the owner of fifteen bonds of one thousand dollars each, issued by the Township of Middleport, in the State of Illinois, dated February 20, 1871, and delivered to the Chicago, Danville and Vincennes Railroad Company. These bonds were payable to bearer, and were bought of the railroad company by the complainant, who paid value for them.

The bill recites that this railroad company was incorporated in 1865 under the laws of the State of Illinois, with power to construct a railroad from a point in Lawrence County, by way of Danville, to the City of Chicago; that an act of the legislature of that state passed March 7, 1867, authorized cities, towns, or townships, lying within certain limits, to appropriate moneys and levy a tax to aid the construction of said road, and

"that said act authorized all incorporated towns and cities, and towns acting under township organization, lying wholly or in part within twenty miles of the east line of the State of Illinois, and also between the City of Chicago and the southern boundary of Lawrence County in said state, to appropriate such sums of money as they should deem proper to the said Chicago, Danville and Vincennes Railroad Company to aid it in the construction of its road, to be paid as soon as the track of said road should be laid and constructed through such cities, towns, or townships, provided however that a proposition to make such appropriation should first be submitted to a vote of the legal voters of such cities, towns, or townships at a regular, annual, or special meeting, of which at least ten days' previous notice should be given, and also provided that a vote should be taken on such proposition, by ballot at the usual place of election, and that a majority of the votes cast should be in favor of the proposition. And your orator further avers that said act authorized and required the authorities of such cities, towns, and townships to levy and collect such taxes and to make such other provisions as might be necessary and proper for the prompt payment of such appropriations so made."

It is then alleged that on the 8th day of June, 1867, after due publication of notice according to law, a meeting of the legal voters of said Town of Middleport was held at which they cast their votes by ballot upon the proposition to levy and collect a tax of $15,000 upon the taxable property of the inhabitants of the town to aid in the construction of said railroad, provided Watseka, a city in the County of Iroquois, situated in or near the south line of said town, should be made a point in said road; that it appeared, on counting the votes,

that 323 were in favor of and 68 were against such tax, and that thereupon the proposition was duly declared carried, the proceedings relating to the meeting and vote duly attested by the town clerk and the moderator of the meeting, and by said clerk duly recorded in the town records.

The bill further avers that the railroad company accepted this vote and appropriation of the township and, relying upon such vote and the good faith of said town, accepted the condition of the appropriation and constructed and completed its track through said town; that on the tenth day of February, 1871, the board of town auditors adopted a resolution of which the following is a copy:

"Whereas the Township of Middleport did on the eighth day of June, 1867, vote aid to the Chicago, Danville and Vincennes Railroad Company to the amount of fifteen thousand dollars, and it appearing that said township is unable to pay such amount in money, therefore resolved by the board of auditors of said township that bonds issue to said Chicago, Danville and Vincennes Railroad Company to the amount of fifteen thousand dollars, together with a sufficient amount to cover the discount necessary on said bonds in negotiating the same, to-wit, one thousand five hundred dollars, said bonds to be dated February 20, A.D. 1871, and to bear interest at the rate of ten percent from date per annum."

In pursuance of this resolution, it is alleged that on the 24th day of March. 1871, the supervisor and town clerk of Middleport executed the fifteen bonds which are the subject of this suit; that

"the said bonds were numbered one to fifteen, inclusive, and were delivered to the said railroad company, upon the fulfillment of the conditions of said vote, in payment of ninety cents on the dollar of the appropriation made to said company by said vote, both parties believing that said bonds were fully authorized by law, and were legal, valid, and binding on said town, and also believing them to be legal evidences of the debt in favor of said company incurred by said town in voting said appropriation."

1876, the Town of Middleport, which up to that time had paid the interest upon the bonds, filed a bill in equity in the Circuit Court for the County of Iroquois against the complainant corporation as the holder of said bonds and certain other persons

"alleging in substance the making and issuing of said bonds, as herein stated, that the same were delivered to your orator, that your orator was the holder thereof, and that the same were made and issued without authority of law, and were invalid, and praying the court so to decree, and to enjoin your orator from collecting the same, and for other relief, as by the record in the cause, upon reference thereto, will fully appear."

It is averred that the circuit court dismissed the bill, but that upon appeal to the Supreme Court of Illinois, the decree dismissing it was reversed, that court holding that these bonds were void as issued without authority of law, and the case was remanded to said circuit court for further proceedings, whereupon it passed a decree in conformity with the opinion of said supreme court adjudging the bonds void, and enjoined their collection. The bill then charges that said supreme court, while holding the bonds to be void, did not deny but impliedly admitted the validity of the appropriation by the town, and insists that by the issue and delivery of said bonds to the railroad company and their sale by that company to the present complainant, it is thereby subrogated to the rights of action which that company would have on the contract evidenced by the vote of the town, and the acceptance and fulfillment of the contract by the railroad company. It is also alleged that no part of the principal sum named in the bonds, or any part of said appropriation, has ever been paid, but that, on the contrary, the Town of Middleport denies all liability therefor; that ever since the purchase of said bonds, the complainant has continued to hold and now holds the same, and has been and now is the holder of all rights which the railroad company or its assigns had against said town by reason of the premises.

A decree is then prayed for that the Town of Middleport shall pay to complainant the amount found due, and shall

without delay levy and collect all taxes necessary for such payment; also that the court will enforce the rights of complainant by writs of mandamus and such other and further orders and decrees according to the course of equity as shall be necessary and proper, and also prays that W. H. Leyford, in whose hands as receiver the Chicago, Danville and Vincennes Railroad Company has been placed by the court, it being insolvent, may be made a party defendant thereto.

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